Thought leadership from our experts

How National Patent Courts Could Mould the UPC

, WilmerHale, US

The buzz surrounding the not too distant entry into force of the Unified Patent Court (UPC) has understandably distracted attention from patent litigation in the national courts in the EU, even though they will continue, for at least seven years after establishment of the new court, to be a major (if not the main) part of the European patent litigation system and will continue to be highly influential in the development of its law. In part this importance is self-evident because for at least these first seven years it will still be possible to litigate classical European patents in national courts, (unless an action under them has already been started in the UPC) and, if the common understanding of the 'opt-out' provision in Article 83(3) UPC proves to be correct, obligatory so to do in relation to 'opted-out' patents. Moreover we should not forget that some major corporations, instead of using the EPO route, seek national patents in one or two major jurisdictions only in the EU in order to secure, at low cost and relatively high speed, examined rights that suffice in some industries to control the European market and that can only be enforced in national courts, a situation that will continue, it would appear, indefinitely. But what happens in the national courts can also, by references to the EU Court of Justice have the effect of binding the UPC, and can also have the effect of providing new interpretations of the same black letter law which the UPC will in some cases be under pressure to match. A recent example of the latter is the law of contributory infringement as applied to the supply abroad of components for inclusion in articles knowing they are for import into a country in which the supply of such components would infringe, as in the decision of the German Federal Court of Justice of February 3 2015 in the MP2 Devices case.

Just like any national court in the EU, the UPC will have to comply with EU law. Although the limited extent to which the EU has competence in patent law (and this is not the place to discuss whether the UPC will have the effect of extending such competence) means that the EU Court of Justice has so far had little occasion to opine on it, other than in the context of Supplementary Protection Certificates and biotechnological inventions. It is however now starting to collect pending references from national courts of potentially wider application to patents and which will also bind the UPC. Thus in the course of 2015 it will deliver judgment in Case C-170/13 Huawei v ZTE which will establish, in the context of Article 102 Treaty on the Functioning of the EU (TFEU), the extent to which standards essential patents can be asserted and injunctions sought under them notwithstanding that licences under them are available.

But it is not only the TFEU with which the UPC will have to comply. It must also comply with EU legislation, notably Directive 2004/48/EC on the enforcement of intellectual property rights, and indeed many of the articles in Chapter IV of the UPC, as to the powers of the new Court, are based on it. Until recently however the enforcement Directive, the vaguely expressed provisions of which are a positive invitation to judicial interpretation has, at least in terms of references to the Court of Justice, impinged little on the consciousness of those who litigate patents, and has instead been the preserve of those seeking orders against online intermediaries in connection with the marketing of counterfeit products on such sites. Some ten years after its entry into force, this is now changing, and references have recently for the first time been made to the Court of Justice as to the damages regime mandated by Article 13 and the cost shifting regime mandated by Article 14. These are reflected in Articles 68 and 69 UPC respectively, and to the extent that the latter elaborate on the former these must be interpreted in such a way as to be consistent with the former.

As to damages the issue has arisen on a reference, late in 2014, from the Dusseldorf Court of Appeal, which although in a plant variety rights case, is of especial relevance to patents as it concerns a common practice under German patent law when assessing damages by reference to a comparable licence, namely whether, when calculating damages according to the licence analogy method a so-called "infringer surcharge" can be added. Article 13 of the enforcement Directive provides for the option of setting "damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question", but Recital 26 observes that the aim of Article 13 "is not to introduce an obligation to provide for punitive damages, but to allow for compensation based on an objective criterion." The view taken by most German courts has been that the notional licence entered into by a party that has been found to infringe a valid patent is entered into under different circumstances from a comparable arms' length licence which can be reflected by applying an uplift of up to 100% to reflect this. The issue referred is whether or not this practice is permitted under the Directive or whether it constitutes an impermissible penalty.

As to costs, Article 14 of the enforcement Directive provides for the successful party, as a general rule, to recover "reasonable and proportionate costs and legal expenses" but its extent has been interpreted in different ways in different EU Member States, with the most generous being the almost compensatory approach adopted by the Dutch and the English courts (although as to the latter, in the Intellectual Property Enterprise Court, this is subject to a ceiling, as is also envisaged by Article 69 UPC). In Belgium Article 1022 of the Judicial Code imposes a statutory cap on the recovery of lawyers' fees and in January 2015 the Antwerp Court of Appeal asked the Court of Justice whether this provision is consistent with Article 14. Its answer will be important for the UPC, as Article 69 UPC, in addition to repeating Article 14 of the Directive, provides for a ceiling.

One aspect of the enforcement Directive that has not yet been the subject of a reference is the first sentence of Article 11, concerning injunctions, and which provides (emphasis added) that in cases of infringement, "the judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement." Similar wording is found in Article 63 UPC. The common practice across Europe is that permanent injunctions are granted against continued infringement except in the most special of situations. There has been pressure, in the drafting of the UPC Rules of Procedure, to provide guidance as to the application of this Article. This has so far failed, but were the Court of Justice, on a reference from a national court, to have an opportunity to opine on this aspect of Article 11 the UPC would be bound by such a ruling.